-LRB- CNN -RRB- -- Renewable energy is generating a lot of political heat . The bankruptcy of solar-panel manufacturer Solyndra , after a half billion dollar loan from the Federal government , has set off a hot debate on Capitol Hill . And a group of American-based solar companies are demanding 100 % tariffs on imports of Chinese solar panels . They charge that China unfairly competes by subsidizing the Chinese industry , which Beijing resolutely denies .

All this , however , is occurring against a larger backdrop . Around the world renewable energy is going through a rebirth . It is becoming a big business . It is also becoming a more established part of the world 's overall energy supply . Last year , $ 120 billion was spent to install renewable electricity generation worldwide . Yet it is still a relatively small business compared to the overall energy business , and one that still faces big challenges in getting to scale on a global basis .

The position of renewable energy is very different from where it was even a decade ago . The modern renewable industry -- wind , solar , and other forms of energy -- was born with a great deal of excitement in the 1970s and early 1980s . But the early hopes soon crashed on the harsh reality of lower energy prices and the fact that the technologies were still immature and not yet ready for primetime . The subsequent years were tough . For many people in the renewable business , the late 1980s and 1990s are remembered as the `` valley of death '' as the pioneers struggled to hang on , often by their fingernails .

But around the beginning of this century , several things came together to breathe new life into the field . Now , it was not only concerns about energy security and general environmental protection , which had stimulated the first boom . The rise of climate change as a central issue in energy policy drove governments to much more actively promote carbon-free electricity . The European Union 's energy policy is now predicated on using renewables to reduce carbon dioxide emissions by 80 % by 2050 .

The other is the rapidly growing energy needs of emerging market countries such as China and India . They have turned to renewables as part of their future supply . As a senior official in Beijing told me , China used to regard the fierce winds in its northwest as a `` natural disaster , '' but now they are prized as a `` very precious resource . '' But it would be a mistake , as is sometimes said , to assume that China has embraced renewables as the only solution . In order to meet its rapidly growing needs for energy , China is pursuing all options -- oil and coal and natural gas and nuclear power , as well as renewables .

Over the last decade , growing support by governments for renewable energy has been critical to its development . Germany and Denmark took the lead in repowering renewables with a new system of electricity rates that blended the higher cost of renewable power into the overall price . As a result , consumers do not see the direct cost of the renewables when it comes time to pay their bills .

In the United States , both federal and state governments provide tax incentives and subsidies that have been critical in stimulating demand , with the aim of increasing output and reducing costs . Moreover , an increasing number of states now require that a certain percentage of electricity must be renewable -- the so-called `` renewable portfolio standards . ''

The most aggressive of all is California , where about 15 % of electricity today is renewable . Earlier this year , Gov. Jerry Brown signed a new law requiring that a third of California 's electricity be renewable by 2020 . This is considered extremely ambitious , especially given the state 's difficult economic situation and a 12 % unemployment rate .

Renewables need to overcome two big hurdles . One is that the sun does not shine all the time , and wind does not blow all the time . As the renewable share of electric power goes up , this `` intermittency '' will be a bigger concern . One solution is more use of natural gas as renewables ' `` partner '' -- to generate electricity at those times when the sun and wind are off duty . Another -- the subject of much research -- is to find some way to store electricity in large scale . Success there would be a major breakthrough for renewable energy

The other challenge is costs . Renewables are carbon free . But , without direct incentives and subsidies , renewables are still generally more expensive than competing sources .

Technology also is critical . A `` great bubbling '' of innovation is at work all across the energy spectrum , conventional as well as alternatives . In the case of renewables , much of the focus is on cost reduction . And certainly the technological advance is evident . A wind turbine today is a far larger and more sophisticated machine than a wind turbine of the 1980s , and it may produce as much as a hundred times more electricity . The costs of solar energy continue to come down , and many of the new approaches under development and in the lab are aimed at further cost reductions .

To achieve big impact , however , renewables still need to establish that they are competitive at large scale . And they are not there yet . Indeed , they have run into an unexpected new challenge . This comes from the recent appearance of large volumes of low-cost natural gas , known as shale gas , which is extremely competitive as a fuel for electricity generation . That adds to the cost pressures on renewable energy .

In the first half of 2011 , renewables constituted 9 % of total U.S. energy . But over 80 % of that renewable energy comes from three sources -- hydropower , which has been around a long time ; wood , which has been around even longer ; and biofuels , primarily ethanol in gasoline . Wind and solar are small , but they are growing . Wind today constitutes over 3 % of U.S. electricity . Solar is much , much smaller .

As costs go down , more solar will come into use around the world . Solar panels will proliferate both on rooftops and in generating stations . As much as 6 % of the capacity installed between now and 2025 could be solar . But , in total , because of the huge size of the global electric power industry , it would only constitute 1 % of total electricity supply .

In other words , wind and solar have much ground to cover , and it will take time . But they have been growing fast , and in the past few years , wind has been one of the main choices of many utilities for new generation . Wind-generated electricity today in the United States is 20 times greater than it was a decade ago .

Overall , renewables are destined to grow . There will be cycles , and hills and valleys to cross -- but no more `` valley of death . '' Renewable will be part of a growing global business that will be measured in hundreds of billions of dollars . But how big a role will they have in keeping on our lights and powering our computers and all the other proliferating gadgets on which we depend ? That will be determined by a mix of government policy , technological advance , the world 's energy needs -- and by sheer economics .

The opinions expressed in this commentary are solely those of Daniel Yergin .

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Daniel Yergin : Solyndra failure does n't mean renewable energy is in trouble

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He says renewables have become big business because of demand , climate change

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Solar and wind are still negligible contributors , but they are destined to grow , he says

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Yergin : Renewables must overcome cost issues , problem of `` intermittency ''